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Suppose you are a loan officer for a bank. A start-up company has qualified for a loan. You are pondering various proposals for repayment:

1. Lump sum of $500,000 four years hence. How much will you lend if your desired rate of return is:

a. 12%, compounded annually?
b. 16%, compounded annually?

2. Repeat number 1, but assume that the interest rates are compounded semiannually.

3. Suppose the loan is to be paid in full by equal payments of $125,000 at the end of each of the next 4 years. How much will you lend if your desired rate of return is:

a. 12%, compounded annually?
b. 16%, compounded annually?

You are a systems technologist working in a big Fortune 500 company. The management asked you to provide an analysis of the current technology trends in the market and explain the direction the company should go to make sure they have up-to-speed systems in the area of databases, online payment methods, and network security.

Write your analysis, advice, and recommendation. In your answer include the aspects of money, time, and resources needed, along with your 5-year plan.

Today is Sarah’s 30th birthday. Five years ago, Sarah opened a brokerage account when her grandmother gave her $25,000 for her 25th birthday. Sarah added $2,000 to this account on her 26th birthday, $3,000 on her 27th birthday, $4,000 on her 28th birthday, and $5,000 on her 29th birthday.

Sarah’s goal is to have $400,000 in the account by her 40th birthday. Starting today, she plans to contribute a fixed amount to the account each year on her birthday. She will make 11 contributions, the first one will occur today, and the final contribution will occur on her 40th birthday. Complicating things somewhat is the fact that Sarah plans to withdraw $20,000 from the account on her 35th birthday to finance the down payment on a home. How large does each of these 11 contributions have to be for Rachel to reach her goal? Assume that the account has earned (and will continue to earn) an effective return of 12 percent a year.